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The medical device industry has long been plagued by a lack of early stage venture capital, with investors in the space often citing uncertain regulatory issuers, reimbursement and adoption as reasons for not heavily allocating into the sector. As such many medical device companies find themselves unable to secure funds from traditional venture capital firms. More and more large and established companies interested in the medical device space however are looking further upstream for innovative companies to collaborate with and add into their product lines. LSN’s research team has spoken with over 60 of these companies across 17 countries, who have established corporate venture funds or allocating directly off of their balance sheet, to identify the types and stages of technologies that they are currently looking for.

Figure 1 | Source: LSN Investor Platform | Data as of October 7, 2015

Corporate venture investors tend to be the most global of the investor classes when searching for new opportunities and the medical device space is no exception. 81% of the corporate venture investors LSN’s research team has spoken with are looking globally, a significant increase over all other types of investors where LSN has found that closer to 50% are looking globally. When fundraising it is crucial that you consider strategic partners located all over the world as they are not only able to provide capital, but also they can often provide distribution and manufacturing in foreign markets.

Figure 2 | Source: LSN Investor Platform | Data as of October 7, 2015

The most common subsectors that these firms are looking to invest in, Electro Mechanical Medical Devices and Diagnostic/Monitoring Devices is driven by a number of factors. The first being that a number of these corporate venture investors are subsidiaries of large tech companies looking to leverage their expertise in software into the medical fields and software enabled devices is one area they see a lot of opportunity in. Other trends factoring into this increased level of interest include the “Internet of Things” spreading into the medical industry, more efficiently connecting patients to healthcare providers through these devices. There’s also a new demand for devices able to communicate easily with EMR to more easily meet the US government’s EMR requirements.

Figure 3 | Source: LSN Investor Platform | Data as of October 7, 2015

The majority of these firms are looking for pre-commercial stage technologies. Prior to commercialization is when the most risk is present in any investment and these strategic players are willing to bear that risk while many venture capital firms appear to be staying clear of it.

As an entrepreneur in the medical device field, not looking to large strategic players as a source for capital is by and large a huge mistake. Not only are these firms looking early, and globally but they also have deep pockets which can be a massive benefit if you require follow on funding. In addition to raising capital from one of these firms, you are often aligning yourself early with an exit partner.

Hot Mandates

The firm is focused on therapeutics companies and does not invest in medical devices, diagnostics, or digital health. The firm is open to considering assets of very early stages, even those as early as lead optimization phase. The firm considers various modalities, including antibodies, small molecules, and cell therapy. Currently, the firm is not interested in gene therapy. Indication-wise, the firm is most interested in oncology and autoimmune diseases but has recently looked at fibrotic diseases and certain rare diseases as well.

The firm is opportunistic across all subsectors of healthcare. Within MedTech, the firm is most interested in medical devices, artificial intelligence, robotics, and mobile health. The firm is seeking post-prototype innovations that are FDA cleared or are close to receiving clearance. Within therapeutics, the firm is interested in therapeutics for large disease markets such as oncology, neurology, and metabolic diseases. The firm is open to all modalities with a special interest in immunotherapy and cell therapy.

A strategic investment firm of a large global pharmaceutical makes investments ranging from $5 million to $30 million, acting either as a sole investor or within a syndicate. The firm is open to considering therapeutic opportunities globally, but only if the company is pursuing a market opportunity in the USA and is in dialogue with the US FDA.

The firm is currently looking for new investment opportunities in enterprise software, medical devices, and the healthcare IT space. The firm will invest in 510k devices and healthcare IT companies, and it is very opportunistic in terms of indications. In the past, the firm was active in medical device companies developing dental devices, endovascular innovation devices, and women’s health devices.

A venture capital firm founded in 2005 has multiple offices throughout Asia, New York, and San Diego. The firm has closed its fifth fund in 2017 and is currently raising a sixth fund, which the firm is targeting to be the largest fund to date. The firm continues to actively seek investment opportunities across a […]

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